Sustainability with a LUS(H)cious Twist

Lush logo

This generation continuously asks questions. Some of the major one’s that companies are asking revolve around sustainability. How can we become sustainable? How do we incorporate sustainability into what our company stands for? The company Lush Cosmetics has found a way to answer those questions in a very luscious manner. Lush is a company based in the UK that creates organic soaps and other body products to free consumers from chemicals typically used in such products. This company prides itself on finding ways to keep the world a healthier place. Therefore, Lush has decided to incorporate ‘CloudApps’ into their management strategy.

CloudApps is a multi-award winning sustainability program that helps companies monitor their carbon footprints. This software also covers performance management and reporting, energy management, and employee engagement along with the carbon footprint management. This system is very intriguing because it’s not only incorporating the sustainability factor for energy and waste, but it is also helping to create a sustainable and resourceful work force throughout the international company.

lush youtube backgroundBy introducing this new operational infrastructure of the company, Lush has been able to get creative in being resourceful in the companies shipping process. All of Lush’smanufacturing factories are over in Europe. This would essentially mean that shipment is not cheap and very wasteful. Instead of allowing this waste to be created, Lush took it upon them selves to find cheaper and lighter ways to fly products overseas. Most of their soaps aren’t individually packaged allowing them to ship more for a lower cost. This reduces the use of extra waste and in my opinion is the best way to ship a fairly durable mass quantity of product.

Not only has this system helped create a more resourceful company, it has also tied recycling into the companies outlook. Since recycling begins at the design, the company has invited customers to return the empty containers that are left over so that they can recycle them internally and be put towards a new container. The company even reaches out as far as asking for all of their customers empty bottle tops so that they can be melted down into a new container as well. I feel that Lush is doing a sensational job with this. They have cut down on packaging by 62% just by taking advantage of recycling!

Monitoring the carbon and operational infrastructures of the company has also influenced regulations and reputation for the company. Pressures on employees to recycle and think resourceful have made an even bigger impact on what the company can give back lush_cosmetic_product_shot1.28sweui6r78kcc804wgsk0gsg.5r15frdicg4kos40gwk400wsw.thto the environment. The company uses the CloudApps to decide what employees get specific bonuses based on how much they are recycle and energy consumption. It is shocking how one little change can help a company produce a number of healthier environments. They have shaped the work environment of the company as well as taken ethical actions in producing a healthier global environment.

Do you think that this approach to their staff will back fire one day? Is the need to monitor and reward the future of management? In comparison to “The Skies TheLimit” spaghetti and marshmallow project, do you think that if we (students) would perform differently if were told about a reward for the highest and most stable tower? How does this act sustainability take part in a better future for other companies?

 

http://www.environmentalleader.com/2012/04/20/lush-cosmetics-taps-the-cloud-to-track-its-carbon-footprint/

http://www.cloudapps.com/product-overview/

Long Live Rock n’ Roll: How Heavy Metal Has Saved the European Cruise Industry.

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As we are all aware, the cruise line industry has been struggling recently. Between ships capsizing and passengers being stranded for days with no food or running water, the cruise industry has taken a huge hit. Recently, however, one European line has come up with a strategy to pique customers’ interests again.

After the 32 deaths that resulted from the Costa Concordia tragedy, European operations managers have been seeking to regain their client’s trust. Since these recent mishaps have taken place, passenger growth rates have decreased by 4, 9, and 18 percent in Germany, Italy, and Spain, respectively. TUI Cruises (which operates between TUI in Europe and Royal Caribbean in Miami) had an operations loss of $14.2 million as of March 31. Cost cuts have been implemented which could include dropping at least one of its five ships if things do not begin to improve.

In an attempt to broaden their client basis, Europe’s $48 billion industry has begun offering cruises targeted at special interest groups, ranging from nudists to food junkies. Among these new cruises is the Full Metal Cruise, on the luxury cruise liner Mein Schiff. This line features heavy metal bands on board including full-fledged mosh pits, rock concerts, on board tattoo artists, and after-hours heavy metal karaoke. German heavy metal band, Kreator, was among some 20 other bands booked by TUI. url.jpgAlmost 2,000 fans booked this rock n’ roll cruise, with most of them being first time cruisers, says company spokeswoman, Godja Soennichsen. The goal of this cruise was not only to generate income to make up for the recent loss, but also to gain publicity and counter the negative press. Managers also wanted to reach a demographic that may have previously never considered a cruise.

Overall, the strategy has been successful. The rock n’ roll themed cruise sold out, with the average passenger age being 39- which is significantly younger than the typical European cruise demographic of 45-65. The ships port, Germany, was also the fastest-growing market in Europe for 2011, providing desirable vacation-goers, because they spend more money on board than any other Europeans. Beer consumption on the metal cruise was also up from the average cruise, at 16 liters per person. This is six times more than your typical cruise.

The bottom line is that for whatever reason, the cruise industry seemed to be reaching the decline point in its product life cycle. However, through the use of differentiation as a product strategy, companies such as TUI have been able to counteract this decline and may be at the beginning of another growth stage.

Do you think that this strategy to gain new customers is one that will last over time or is it just a quick fix for a dying industry?

Is there a special type of cruise that you would like to go on or a certain special interest group that you think should be targeted for these types of cruises?

http://www.businessweek.com/articles/2013-05-23/heavy-metal-rocks-in-europes-cruise-market

Flying Through Quality

Boeing 787 (Google Images)

Quality is an important factor when producing goods and services. Each organization sets its own quality standards based on customers’ demands and needs. If we look at quality from the customers’ perspective we will want to have products that we can rely on when using them, otherwise if the product is defective we might want to stop using it. On the manufacturers’ perspective if the customers are unsure of quality on their products, it is their job to make the necessary adjustments to make the product attractive to the customer again.  When the situation is created by defect on fabrication it can mean big amount of money losses for the manufacturer, therefore it should work on fixing the defects as soon as these are detected in order to avoid bigger losses and not get their reputation hurt.

 

An example of a company restoring confidence in its product is Boeing and the battery problems that its passenger jet 787s has been facing since January and that it cost them to stop flying them. According to an article in the New York Times by Christopher Drew and Jad Mouawad, the Federal Aviation Administration approved in April the company’s plan to fix the batteries of 50 jets that where delivered at that time. The authors explain that the lithium-ion batteries problems were detected when two of them had overheated in two different jets. As soon as the problem was detected its engineers worked on finding the causes of the defective batteries and the best approach to fix it. Collection of data was necessary to support the changes and come up with a plan.  Luckily, the 800 orders that were already planned for the plane were not affected, the authors explain, since it promised a 20 percent fuel savings. After collecting data and analyzing it, the company decided to send several technicians around the world to fix the batteries and install the new system which includes better insulation and other features to prevent batteries incidents (Drew and Mouawad). The article goes on by explaining that even after this efforts by the company to fix the problem, Japanese airlines have asked for more assurance that the incidents will not be likely to happen again or at least detected by introducing monitoring systems for the batteries that would send information about the batteries conditions and replacement of them every certain time period. All this efforts are done in order to recover the customer’s confidence.

 
We can see in this example how a defect might represents serious consequences in the company’s reputation and generate monetary losses. This illustrates the importance of having systems that monitor the quality and processes on production and if problems are presented look for the causes and fix them as soon as possible.

 
Do you think Boeing’s approach to solve the problem was appropriate? Should the company provide monitoring systems that Japanese airlines demand or do you think is enough just by replacing the batteries and the insulation system implemented?

 

Source: http://www.nytimes.com/2013/04/20/business/faa-endorses-boeing-remedy-for-787-battery.html?_r=0&adxnnl=1&pagewanted=all&adxnnlx=1370203420-Yz8jS+nRMM8ILF6/hvaO2g

Chocolate: The Road to Luxury

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For all of you chocolate lovers out there beware: there may be a flaw in Western chocolate manufacturers’ supply chain management of cocoa. Productivity is not at the levels it needs to be to satisfy manufacturers and consumers. To better put this into perspective, Mars has found that if the levels of productivity remain the same as today, by the year 2020 there would be a shortage of 1.1 million tons of cocoa. If this occurs and current productivity levels of cocoa trended into the future, the cocoa farming business will not be headed in a promising direction.

The disconnect lies within cocoa faming itself. There is little incentive for cocoa farmers to continue in their line of work because of the competitive rubber industry. It is considered a less uncertain industry with a longer crop season by about four months. On top of this, the wage for both types of farming is roughly the same.

The other constraint of the industry is the high risk for disease outbursts. This is partly due to the inadequate access of much needed fertilizers for the cocoa crop.

Cocoa-farmers do not come anywhere near the crop’s capacity since their utilization is only around 60%. Cocoa manufactures have recognized the scarcity as a sincere problem since in many growing areas more than 40% of the cocoa crop is destroyed due to vermin and disease.  One would hope that this type of scarcity could be due to assignable variation that can be improved by subtracting bad causes.

How would you react if chocolate turned into a luxury good instead of an affordable snack due to flaws in the supply chain management?

Chocolate manufacturers are looking to provide solutions for productivity in the cocoa-farming realm. Many companies like Mondelez and Mars have invested millions in education programs in hopes to increase productivity and decrease disease-ridden crop. Mondelez has gone as far as hiring students from universities for these cocoa programs to target efforts toward younger generations. This seems to be an efficient approach, given the fact that peer motivation is a convincing form of motivation.

Another potential solution was Ivory Coast’s decision to set a price minimum for cocoa. This was an astonishing action that stresses how essential cocoa farmers are in the industry.

It is hard to believe that the issue has gone this far. In my opinion, action should have been taken much sooner. The uphill battle is much worse now that efficiency levels have sunk so far below maximum capacity.

Do you think that these efforts put forth by chocolate manufacturers will be enough to save the chocolate industry?

What else can be done to improve the supply chain management and productivity in the industry?

Have you noticed any other flaws in the cocoa/chocolate industry besides the supply chain management?

Which action will have a greater affect on the industry: a price minimum or cocoa farming education programs?

http://online.wsj.com/article/SB10001424127887324412604578513140098292744.html?KEYWORDS=operations+management+supply+chain

 

Price Menu in Hospitals?!

Businesses try to implement various strategies such as differentiation, low price, and rapid response to stay ahead in competition and to attract more customers. But, when it comes to hospital industry, there is nothing much to do to increase profit other than improving internally such as adding new services, outsourcing some work, improve quality, increase profit margin etc. Most of the hospitals have successfully increase their revenue by charging higher amount to insurance holders and get away with it as not many people pay attention to it.

But, it may change soon. Steven Sonenreich, CEO of Mount Sinai Medical Center in Miami Beach, announced that he would bring transparency to industry by posting prices comparing to Blue Cross and Aetna. In early May, the center for Medicare and Medicaid Service released data from 3,000 hospitals that accept government insurance. According to this data, price of most of the treatments vary as much as by three times. And these hospitals get away with it because insurance companies have to pay that amount and patients pay fixed co-pay.

However, with increasing cost of Health care, insurance companies have changed co-payment plans from fixed co-pay to percentage of total billed amount. Therefore, patients will be more aware about how much they will be charged. Thus, availability of price information can benefit both hospitals and patients. After the announcement, Brian Keeley, CEO of Baptist Health in South Florida stated that the hospital industry is headed in that direction. Thus, in short time, all hospitals nationwide will follow the steps of Mount Sinai Medical center.

Now the question comes to mind is why Sonenreich wants to be first to be in industry where secrecy of price has been working out perfectly. If it were some other industry, being first to market would be smart move. Therefore, the reason for being first to market in my opinion is to build reputation and favorable word of mouth when every hospital at least in Florida has adopted this. Thus, their plan seems to attract more patients in long run.

Furthermore, as we have discussed in chapter one that measuring quality of services is much more difficult than physical products. And hospitals rely on attracting more customers by providing better quality services. Most consumers make purchases based on assumption that higher the prices better the quality, as we talked about in chapter 6. For example, more than 80% students chose Rolex as better quality where I think other watches were better quality for their price. Similarly, with availability of price information in hospitals, I think people with go to the hospitals that charges more. But, as Sonenreich stated that they are the lowest cost hospital in area, they might lose patients to competitors because of the price transparency. Thus, their decision of transparency might hurt them in long run.

Do you think the transparency in hospital cost will make us more conscious about where we go? And how will if affect the Mount Sinai Medical Center?

http://www.miamiherald.com/2013/05/14/v-fullstory/3397479/in-miami-more-hospital-prices.html

http://www.businessweek.com/articles/2013-05-20/a-hospital-ceo-promises-more-pricing-transparency-and-makes-rivals-squirm

Elimination of Enrollment Bottleneck: Graduates Who Don’t Do Science.

Bottleneck
Source: xda-developers.com

In class, we learned that a bottleneck is the longest activity that is the limiting factor in operations management. Managers want to match capacity and design while still maintaining the greatest efficiency possible.

Education is no different as it follows basic business rules. Schools increasingly want students to graduate, get jobs, and eventually donate back as alumni. Universities across the country have a problem with so called “bottleneck courses,” which prevent students from graduating. California State University (CSU) reports about 30 such courses that have a high rate of failure, including math, science, and history. Those courses distract students from their major studies and often cause failing or withdrawing, if not dropping out of college altogether.

science-lab
Source: brightlandcollege.in/

CSU wants to address the bottleneck courses by providing science labs online and moving away from traditional in-person classes, especially for students who do not major in science. CSU does not have sufficient capacity to match demand for bottleneck classes due to limited lab space. Virtual labs are a way of offering more lab sections and thus increasing enrollment and moving more students through the system (increasing the rate of graduation).

Low cost of such classes coupled with high demand means more money the school will earn and able to re-invest. However, CSU’s solution to bottleneck science courses raises concerns over the quality of education given. In-person classes are especially important for science labs; a biology department chair at CSU, Jeffrey Bell, says, “my biggest concern, especially with freshman classes is you don’t want students seeing reality as a video game—a key thing in science is we investigate reality.”

Before we can argue about the quality of such courses, let’s ask ourselves: “what is the real value of education?” The content that is learned in science classes is available online. Therefore, the content is not the sole value of education, but rather a college experience: the ability to interact with the professor and peers on one-to-one basis. But just how important is the experience for non-science majors who just want to pass the class to graduate?

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Source: biofluff.files.wordpress.com

CSU’s demand far exceeds school’s effective capacity, mainly due to struggling students repeating the class. School’s solution to increase the capacity through online sections to match enrollment demand is one way of managing the problem. School could also manage demand by increasing capacity—building new science labs and hiring more professors. This long-term solution would ensure that struggling students are offered adequate in-person help, rather than let them pass without a sufficient knowledge of science.

CSU’s tactic for managing bottleneck science lab courses is rather new, thus raises concerns about its quality, especially in the time when U.S. students lag behind in science and math compared to other countries. Is removing this bottleneck sacrificing or improving the quality of science lab courses? Will this decision eventually lead to graduates who do not have sufficient knowledge of science or scientific thinking? Can you think of other solution to tackle the bottleneck course problem?

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Source: www.scpr.org
Sources:

Businesses Are Moving to the Clouds

 

Cloud computing can best be described as a real-time communication network that involves a large number of computers, servers, desktops, tablets, laptops, phones, etc. Cloud computing allows for running programs on many connected devices at the same time. Cloud computing in the business environment started with employees. Employees want the option to have their office travel with them. Cloud computing allows employees to have all the benefits of working in the office without actually having to be in the office. All they need is a device that can connect to their business network; even a phone with internet capability can be sufficient. This is beneficial to any company, because employees have proven to be more efficient and with the flexibility of working remotely employees are even willing to work longer hours if that means they can work outside of the office. Another benefit is bringing in your own device for work. If you have an Apple computer, you know how to work your Apple computer, and the same goes for Dell, Asus, etc. The point being, employees do not want to learn to use a new device when they are perfectly comfortable with their own and that makes cloud computing useful in that sense.

Not only do employees reap the benefits of the cloud computing system, the business/IT model forecasts are more accurate than ever. In the past when businesses would purchase new hardware or software they would have to forecast into the future spanning five to ten years. The problem is, businesses grow which inhibits the need for more employees which demands more storage space, and you get it… the forecast is wrong and you have to purchase more, and it’s not cheap! With cloud computing server capacity and running out of storage space is no worry.

Most importantly, cloud computing has positively effected customers. As we learned in class via the airplane experiment and have been reminded all quarter, the customer is the most important aspect in any business. If you don’t know what your customer wants, how will you be successful? Cloud computing has changed the way a company can interact with the customer. It allows for a business to react to customer needs as soon as the customer wants. Customers don’t have to wait to shop for products and services they have access 24/7. With cloud computing customer satisfaction reaches all new levels.

The newest cloud on the market is CenturyLinkVoice. CenturyLinkVoice is promoted as a business solutionfor small and large companies. And the idea is the same as all of the factors above; it provides a network for employees that will enable them to work wherever they have a functioning device, and more importantly it caters to customers wants and needs. For a short promotional video about CenturyLinkVoice, please see the link at the bottom of this post as well as an article discussing the impact cloud computing has had on Toyota.

 

To Understand Just How Much The Cloud Will Change The World, Look At Toyota

CenturyLink Promotional Video

Article – Cloud Computing: Effectively Changing The Business Operation Model

Are Corporations Our Personal Shoppers?

The thought of ordering an item online and receiving it the same day, just a few hours later seems unrealistic. With technology becoming more integrated in our world and the demand for instant gratification, this unrealistic idea is now a reality. Major corporations like Wal-Mart, Amazon, and EBay have adopted this new service of same-day delivery. It is really testing the limits of supply chain management, and now a whole new look on logistics is being placed in the hands of these corporations.

walamrt  Wal-Mart , is sitting at an advantage because of its massive fleet of stores across the country. They use their 4,005 locations as inventory holders and distribution centers, so now when you order something before noon you can receive it by that evening. Workers will literally go down the aisle and collect the item you want, which is later delivered to your door. Even though this service is only in the test phase in five major cities, Denver, Philadelphia, Minneapolis, northern Virginia and San Francisco/San Jose, it has proven to be a huge success thus far.

Amazon has a new technology that now sends your order to the closest of its 40 massive and highly efficient distribution centers that has same day service available. From here a robot find your item and places it in a place where a human can package it and ship it to you just in time before the day is over. This is pretty crazy, right? Wait till read this next corporation’s new strategy!

debay   EBay, a dominant online seller has a brand-new beta service that brings same day delivery to an even new level. It currently operates in beta form in New York, San Francisco, and San Jose. This service involves personal shoppers, or “valets, that EBay will send to pick up a good you have just ordered. They will literally drive to the outlet from which you ordered it from through EBay, and deliver it to your doorstep that same day, sometimes even within only few hours! If this doesn’t impress you then this will. EBay now even offers an iOS app that you can use to buy, and track your item for same day delivery. This app tracks your “valets” progress in real time so you know exactly where he/she is, what step of the delivery they are on, and how far away they are from your home. This tracking app will even give you a picture of what the “valet” looks like so you can recognize them when they arrive. Once they have arrived, all you have to do is simply swipe your credit card, or pay with PayPal. The best part about this service is that it costs only $5, yes that’s it!

With this extremely gratifying service from these corporations how do you think it tests the limits of supply chain management and inventory management? Could this be the future for online shopping or delivery? Do you think implementing the service that EBay has in many other corporations could add a lot of jobs to the economy?

 

Sources:

http://www.wired.com/insights/2013/05/once-refined-same-day-delivery-will-be-commonplace/

 

http://blog.apptricity.com/bid/283436/How-Walmart-and-Others-Are-Achieving-Same-Day-Delivery

 

Beef Prices at an All-Time High a Good Thing?

In the recent months, commodity prices have soared to record highs, with the sharpest increase being in the price of beef. The reason for this increase is partially due to last summer’s drought, but it is much higher than most analysts predicted. This has begun to affect the profits of large restaurant chains such as Burger King, Wendys, and most importantly McDonalds.

1C7301038-130509_angus_hmed_1213p.blocks_desktop_smallIn early May, McDonalds announces that it would remove its Angus Third Pounders from their menu. The company said the removal of this burger was done to make room for other food options, but most experts agree that the profit margins are too low for beef items like these to remain profitable.

This has resulted in McDonalds and other restaurant chains to begin to retool their supply chain to put a heavier emphasis on chicken products, which is more profitable than beef. McDonalds has already begun to roll out new items such as the premium chicken wraps. This will definitely be more costly in the short run, but with rising prices, and more health-conscious consumers, it is a good long-term strategy.

With obesity at all time highs, and consumers becoming more health-conscious, this rise in beef prices could not come at a better time. Chicken is much healthier that beef, having significantly less calories and fat. With chicken prices being low, this could benefit both the restaurants and the consumer.

This situation can be compared to gas prices hitting an all time high in 2008.  Once prices hit the high, there was a sudden demand for more fuel-efficient vehicles, planes, trains, etc. They use less fuel, are much more efficient, and produce significantly less emissions that harm our environment. Similar to beef prices, consumers had no reason to switch to the better option until it became cost-effective.

In any industries of this size, change has to be gradual. Switching from beef to chicken is easy for consumers. On the contrary, in order to fulfill demand, restaurants like McDonalds have to completely re-tool their supply-chain. Farms need to change their facilities to accommodate more chickens, processing plants need to change all their machinery, and restaurants need to change how they cook and prepare the final product.

I personally believe that this will benefit both the profit-minded producer, along with the health-conscious consumer. The fast food world is changing, and these companies know that innovation is essential to adapt to the changing taste buds of consumers.

What is your eating preference at these fast food chains? Do you think this rise in commodity prices is a good thing? Have you become more health-conscious?

http://www.nbcnews.com/business/wheres-beef-mcdonalds-dropping-angus-burgers-us-menu-1C9864163

Abercrombie & its Hitch.

Abercrombie & Fitch has been affected by a dramatic decrease in sales in the US. ANF’s stock had once been gaining 20%, when the stock market barely moved. However, everything came to an end on May 24, 2013, when ANF reported its earnings. ANF’s store sales declined 17%. Their shares then went down 8%. Even though they reduced their loss to $7.2 million from $21.3 million, it completely blew Wall Street’s prediction of $0.05 loss per share.

What could be the cause of these huge losses that Abercrombie is facing? Is it the result of CEO Mike Jeffries’ comments that resurfaced recently from a 2006 interview, on how the Abercrombie and Fitch brand don’t carry plus sizes for teens, because the brand exclusively only goes after the cool, good-looking kids? Or could there be something more?

Well, it turns out that Abercrombie started declining before the CEO’s comments reemerged this year. Even though there has been a lot of consumer out lash at the company, the CEO insists that the main problem facing Abercrombie is inventory shortage issues. Abercrombie hasn’t been able to bring in their spring merchandise quickly into the stores, compared to most of their competitors like H&M, who believe in fast-fashion. To gain a competitive advantage and to get back on their sales track, Abercrombie is changing the way they order their inventory, for a quicker turnaround. The CEO stated that most of their inventory issues have been resolved now, however, their sales profits forecasts has been lowered for the rest of the year, compared to previous years. With the company operating 1,053 stores currently, they also predicted to close 40 to 50 stores in the United States. Abercrombie has been acting really quickly on addressing key issues throughout their company to get their profits back up.

In class, we learned about the ten critical decisions which includes inventory management, then we learned about ethics and social responsibility and finally forecasting. Abercrombie’s situation ties in all of these things we’ve learned and teaches us how important these factors are in a business.

The company is now dealing with their losses and their shares plunging, just because of the inventory issue. Another issue, I think they’re facing is the social media. As a reputable company, they have a social responsibility to respect all of their customers. Ever since the CEO’s comments appeared in the media, many people have been fighting against Abercrombie (Examples: A man donating Abercrombie clothes to homeless, a plus size blogger posing in similar Abercrombie ads, a teen activist who petitioned for an apology from the CEO with 68,000 signatures). Do you think that Abercrombie is dealing with these losses solely because of their inventory management or because of the recent outlash at the company? Also, will Abercrombie  remain confident in their solid brand equity, when its competitors like H&M, American Eagle, and Aeropostale are attracting teens with their prices and fast fashion layout, bringing in new merchandise to the stores more often?

Source:

http://www.latimes.com/business/la-fi-abercrombie-earnings-20130525,0,6735405.story

http://www.chicagotribune.com/business/breaking/chi-abercrombie-earnings-20130524,0,3689716.story

Plus size blogger: http://abclocal.go.com/kgo/story?section=news/business&id=9113106

Video:

Man giving homeless people, Abercrombie & Fitch clothes: http://www.youtube.com/watch?v=TPmqZAhLVuI